Burkhalter v. Hartford Underwriters Insurance Company

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF LOUISIANA

JERRY BURKHALTER, ET AL. CIVIL ACTION

VERSUS

HARTFORD UNDERWRITERS NO. 17-01086-BAJ-SDJ

INSURANCE COMPANY, ET AL.

FILING APPLIES TO:

17-cv-01086-BAJ-SDJ Burkhalter, et al., v. Hartford Underwriters Insurance

Company

17-cv-01129-BAJ-RLB Kozero, et al., v. American National Property and Casualty

Company

17-cv-01140-BAJ-RLB Henderson, et al., v. American National Property and

Casualty Company

17-cv-01233-BAJ-EWD Armstrong, et al., v. Liberty Mutual Fire Insurance

Company

17-cv-01235-BAJ-EWD Poynor, et al., v. Liberty Mutual Fire Insurance Company

17-cv-01264-BAJ-EWD Neal v. Liberty Mutual Fire Insurance Company

17-cv-01265-BAJ-EWD James, Jr., et al., v. Liberty Mutual Fire Insurance

Company

17-cv-01266-BAJ-EWD Bresee, et al., v. Liberty Mutual Fire Insurance Company

17-cv-01303-BAJ-EWD Smith v. Liberty Mutual Fire Insurance Company

17-cv-01336-BAJ-RLB Turner, et al., v. American National Property and Casualty

Company

17-cv-01589-BAJ-RLB Aucoin, et al., v. Bankers Specialty Insurance Company

17-cv-01599-BAJ-RLB Williams v. Bankers Specialty Insurance Company

RULING AND ORDER

Each of the cases captioned above arises from the historic Baton Rouge flood

of August 2016. They are among dozens of similar flood insurance disputes that

remain pending in this Court.

The issue presently before the Court is whether a write-your-own (WYO)

carrier’s failure to issue a written denial of an insured’s claim under the Standard

Flood Insurance Policy (“SFIP”)1 divests the Court of jurisdiction over a lawsuit

seeking to enforce payment of that claim. The issue arises because in each of the

above-captioned cases, the Defendant insurer has failed to issue a written denial,

even at this late date. The parties have submitted show cause briefing, in which

insurers and insureds alike universally agree that the Court maintains jurisdiction

despite the missing denial letters.2 For reasons explained below, the parties’ briefing

misses the mark, and fails to establish that jurisdiction is satisfied. Accordingly, the

Court will sua sponte dismiss each of the above-captioned actions for lack of

jurisdiction.

I. RELEVANT BACKGROUND

As recounted in the Court’s show cause orders, the fact of the missing denial

letters—and the legal issue of whether a missing denial letter divests the Court of

jurisdiction—moved centerstage following three separate pretrial conferences in

1 The SFIP appears at Appendix A(1) to Title 44, Part 61 of the Code of Federal Regulations.

44 C.F.R. § Pt. 61, App. A(1).

2 In each of the above-captioned cases, the Plaintiffs’ attorneys (Pandit Law Firm, LLC) and

the Defendants’ attorneys (Nielsen & Treas, LLC) are the same. In each case, the parties’

show cause briefing is identical, save for the case caption. Because the issue of the missing

denial is the same across all of the cases, and the briefing is carbon copied, the Court sees fit

to issue one common ruling that will be docketed in each case.

For ease of reference, all citations included herein are drawn only from the docket of

the first-filed action, Burkhalter, et al. v. Hartford Underwriters Insurance Company, No. 17-

cv-01086-BAJ-SDJ.

which counsel reported a missing denial letter.3 In each instance, the issue was raised

for the first time after nearly four years of litigation. In each instance, counsel

characterized the missing denial as a “jurisdictional” impediment, and invited the

Court to devise a “creative” solution. In each instance, the Court rejected counsels’

invitation to engage in jurisdictional gerrymandering, and issued an expedited

briefing deadline to address the parties’ jurisdictional concerns. In each instance, the

parties settled rather than submit briefs as ordered.

Smelling a rat, the undersigned reviewed all remaining flood cases pending in

this section. On July 8, 2021, the undersigned issued show cause orders in those cases

where the record was ambiguous regarding the existence of a written denial—sixteen

show cause orders, total. (Doc. 19). On July 12, 2021, the Court supplemented its July

8 Show Cause Order, requiring the parties to specifically brief whether the record in

each case established a satisfactory “written denial,” as that term is defined by the

U.S. Court of Appeals for the Third Circuit in Migliaro v. Fid. Nat'l Indem. Ins. Co.,

880 F.3d 660 (3d Cir. 2018). (Doc. 21).4 Collectively, these show cause orders required

the parties to jointly submit proof of a written denial or, alternatively, show cause

why, absent a written denial, the individual actions should not be dismissed for lack

3 Counsel first raised this issue to the Court’s attention on April 8, 2021, when they appeared

at a pre-trial conference on behalf of the litigants in Landry v. Liberty Mutual Fire Insurance

Company, No. 17-cv-1358. Counsel raised the issue twice more on July 1, 2021, when they

appeared at pre-trial conferences on behalf of the litigants in Gaudin v. Bankers Specialty

Insurance Company, 17-cv-01358, and Walker v. Bankers Specialty Insurance Company, 17-

cv-01364.

4 The U.S. Court of Appeals for the Fifth Circuit has not squarely addressed the meaning of

“written denial” as that term is used in the SFIP, but has cited favorably to the Third Circuit’s

analysis in Migliaro. See Cohen v. Allstate Ins. Co., 924 F.3d 776, 780-81 (5th Cir. 2019).

of jurisdiction. (Docs. 19, 21).

Among the sixteen cases in which the Court entered a show cause order, only

four returned proof of a written denial. In the twelve remaining cases—captioned

above—it is now revealed that the Defendant insurer has never issued a written

denial of the Plaintiffs’ claims, either before or after Plaintiffs filed suit.5 Put

differently, in each of the above-captioned cases, Plaintiffs jumped the gun, and

initiated litigation before the Defendants denied their claims. Thereafter, the

Defendants sat on their heels, allowing these actions to proceed for nearly four years

without raising the issue.

As will be explained, the fact of the missing denials is fatal to the viability of

these actions.

II. DISCUSSION

A. Controlling Standards

i. Jurisdiction

“Federal courts are courts of limited jurisdiction. They possess only that power

authorized by [the] Constitution and statute, which is not to be expanded by judicial

decree.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citations

omitted). “Federal courts, both trial and appellate, have a continuing obligation to

examine the basis for their jurisdiction. The issue may be raised by parties, or by the

5 In one additional case, Castleberry, et al. v. American National Property and Casualty

Company, No. 17-cv-01138-BAJ-RLB, the Defendant insurer issued a written denial after the

Plaintiff filed suit. The Castleberry case is subject to a separate show cause order, requiring

the parties to brief whether a post-suit denial letter is sufficient to establish subject matter

jurisdiction.

court sua sponte, at any time.” MCG, Inc. v. Great W. Energy Corp., 896 F.2d 170, 173

(5th Cir. 1990).

Importantly, “[a] case or controversy must be ripe for decision, meaning that it

must not be premature or speculative. That is, ripeness is a constitutional prerequisite

to the exercise of jurisdiction.” Shields v. Norton, 289 F.3d 832, 834–35 (5th Cir. 2002)

(emphasis added, footnotes omitted).

Article III of the United States Constitution provides that federal courts

have the power to decide only actual cases or controversies. The

justiciability doctrines of standing, mootness, political question, and

ripeness all originate in Article III's ‘case’ or ‘controversy’ language. The

ripeness doctrine also is drawn from prudential reasons for refusing to

exercise jurisdiction. The ripeness doctrine's basic rationale is to prevent

the courts, through avoidance of premature adjudication, from

entangling themselves in abstract disagreements.

Choice Inc. of Texas v. Greenstein, 691 F.3d 710, 714–15 (5th Cir. 2012) (quotation

marks, citations, and alterations omitted).

“A case is generally ripe if any remaining questions are purely legal ones;

conversely, a case is not ripe if further factual development is required.” Id. (quoting

New Orleans Pub. Serv., Inc. v. Council of City of New Orleans, 833 F.2d 583, 587 (5th

Cir. 1987)). A case that is not ripe must be dismissed for lack of subject matter

jurisdiction. Shields, 289 F.3d at 837; accord Choice, 691 F.3d at 718; New Orleans

Pub. Serv., Inc., 833 F.2d at 588.

ii. SFIP Construction And Relevant Terms

The U.S. Court of Appeals for the Fifth Circuit has repeatedly advised that the

SFIP “must be strictly construed and enforced.” Gowland v. Aetna, 143 F.3d 951, 954

(5th Cir. 1998). “The terms of the SFIP are dictated by FEMA, and cannot be waived

or modified by [any party],” including the defendant insurer. Wright v. Allstate Ins.

Co., 415 F.3d 384, 388 (5th Cir. 2005). These strict rules of construction cannot be

relaxed, even if a “harsh” result follows. Id. at 387 (5th Cir. 2005) (discussing

Gowland, 143 F.3d at 955); accord Cohen v. Allstate Ins. Co., 924 F.3d 776, 782 (5th

Cir. 2019) (“[N]ot even the temptations of a hard case will provide a basis for ordering

recovery contrary to the terms of a regulation, for to do so would disregard the duty

of all courts to observe the conditions defined by Congress for charging the public

treasury.” (alterations omitted; quoting Forman v. Fed. Emergency Mgmt. Agency,

138 F.3d 543, 545 (5th Cir. 1998)).6

In relevant part, the SFIP provides:

You may not sue us to recover money under this policy unless you have

complied with all the requirements of the policy. If you do sue, you must

start the suit within one year after the date of the written denial of all

or part of the claim … . This requirement applies to any claim that you

may have under this policy and to any dispute that you may have arising

out of the handling of any claim under the policy.

SFIP, art. VII(R) (“Suit Against Us”). Interpreting precisely this provision, the Fifth

Circuit recently affirmed that an insured must “turn square corners,” and that the

Court “must … narrowly construe when a policyholder may bring suit.” Cohen, 924

F.3d at 780 (quotation marks omitted)).7

6 The SFIP itself expressly states that its terms “cannot be changed nor can any of its

provisions be waived without the express written consent of the Federal Insurance

Administrator.” SFIP, art. VII(D) (Amendments, Waivers, Assignment). In these cases there

is no evidence that FEMA relaxed the SFIP’s time-of-filing requirements, allowing Plaintiffs

to file suit before obtaining a written denial of their claims.

7 The Court notes that the U.S. Court of Appeals for the Third Circuit relaxed the SFIP’s Suit

Against Us provision, by interpreting the term “written denial” to include “written rejection

of a proof of loss … if, based on it, the policyholder files suit against the WYO carrier, thereby

accepting the written rejection of a proof of loss as a written denial of the claim.” Migliaro v.

B. Discussion

It is now clear—for the first time, after nearly four years of litigation—that the

Plaintiffs in each of the above-captioned actions filed suit before obtaining a written

denial of their claim, in direct violation of the SFIP’s requirement that any suit for

coverage “must start … after the date of the written denial of all or part of the claim.”

SFIP, art. VII(R) (emphasis added). By prematurely filing suit, Plaintiffs deprived

the Defendant insurers of an opportunity to adjust their claim within 60 to 90 days,

as required under the SFIP.8 See SFIP, art. VII(M)(1) (Loss Payment). Simply put, at

the time of filing, Plaintiffs’ claims were speculative—and therefore not ripe—

because the possibility remained that the Defendant insurers would adjust Plaintiffs’

claims favorably. In other words, when Plaintiffs sued, they were merely guessing

that their insurers would deny coverage. More than guesswork is required to

establish a ripe, justiciable case under Article III of the U.S. Constitution. Shields,

289 F.3d at 837; accord Choice, 691 F.3d at 718; New Orleans Pub. Serv., Inc., 833

F.2d at 588. Lacking any written denial whatsoever, Plaintiffs’ claims are not ripe

and must be dismissed for lack of subject matter jurisdiction. Shields, 289 F.3d at 835

Fid. Nat'l Indem. Ins. Co., 880 F.3d 660, 665 (3d Cir. 2018). The Fifth Circuit has not

expressly adopted this construction, but, as stated supra n.4, has cited favorably to the Third

Circuit’s Migliaro decision. See Cohen, 924 F.3d at 780-81. Regardless whether Migliaro’s

interpretation of “written denial” applies generally in this Circuit, the parties concede that it

does not apply here, because in these cases there is no written denial or rejection of a proof

of loss. (See Doc. 22 at 7-8).

8 The Defendants’ show cause briefing complains of the missed opportunity to review

Plaintiffs’ claims, stating that in each case “there is no written denial letter because

Defendant did not have the opportunity to issue a denial of Plaintiffs’ supplemental flood loss

claim leading to the question of jurisdiction at bar.” (Doc. 22 at 8).

(“[R]ipeness is a constitutional prerequisite to the exercise of jurisdiction.”).9

The parties’ show cause briefing fails to convince the Court otherwise. For their

part, the Defendant insurers encourage the Court to look past the ripeness inquiry,

and to exercise jurisdiction under 42 U.S.C. § 4072, 28 U.S.C. § 1331, 28 U.S.C.

§ 1337, and/or 28 U.S.C. § 1331. (Doc. 22 at 2-7). But this puts the cart before the

horse. Certainly, had the Defendants issued written denials, jurisdiction would be

appropriate under any or all of these statutes. But, as explained, “ripeness is a

constitutional prerequisite to the exercise of jurisdiction.” Shields, 289 F.3d at 835

(emphasis added). This case is not ripe because it still remains to be determined

whether (and to what extent) the Defendants will deny payment of Plaintiffs’ claims.

The Court cannot simply ignore the parties’ failure to satisfy a “constitutional

prerequisite,” even if the Court would otherwise unquestionably maintain

jurisdiction over a SFIP dispute.10

9 Alternatively—and in a closely related vein—these actions must be dismissed because

without a written denial, the Court is forced to assume what form the Defendants’ denial

would take, and whether Defendants would deny Plaintiffs’ claims in whole or in part. But

any such assumption puts these cases in the hypothetical realm, which, in turn, puts the

Court in the position of rendering an advisory opinion. See Texas v. Travis Cty., 272 F. Supp.

3d 973, 980 (W.D. Tex. 2017) (explaining that federal courts may not answer “hypothetical

legal questions,” and must reserve a decision until a specific dispute arises among the parties

(citing Flast v. Cohen, 392 U.S. 83, 96-97 (1968)), aff'd, 910 F.3d 809 (5th Cir. 2018). “[T]his

Court lacks the jurisdiction and the judicial resources to issue an advisory opinion.” Amar v.

Whitley, 100 F.3d 22, 23 (5th Cir. 1996), and has declined to exercise jurisdiction over

insurance disputes involving similarly abstract facts. See, e.g., Tribute Real Estate, LLC v.

United Artist Theatre Circuit, Inc., No. 10-cv-106 2012 WL 1590042, at *1 (M.D. La. May 4,

2012) (Brady, J.) (declining to issue declaration that “in the event of a covered loss,” defendant

would be obligated to make a claim under the insurance policy and to contribute the

insurance proceeds towards the cost of repairs).

10 Defendants insist that “a denial letter is not the predicate to a court’s subject matter

jurisdiction,” and cite “a dozen cases from the Fifth Circuit where the Court exercised

jurisdiction over an NFIP dispute and determined on the merits that the policyholder failed

to meet the conditions precedent prior to filing the lawsuit.” (Doc. 22 at 6, n.9). The best that

Alternatively, the Defendant insurers urge the Court to accept their pleadings

denying liability as a substitute for written denials—namely, their Answers to the

Plaintiffs’ Complaints—insisting that their post-litigation conduct makes “the

absence of a denial letter is irrelevant to the substantive dispute.” (Doc. 22 at 10).

The Court gives little weight to Defendants’ post-litigation posturing. As a general

rule, post-litigation filings are rarely admissible to support a claim under an

insurance contract. E.g., Weiser-Brown Operating Co. v. St. Paul Surplus Lines Ins.

Co., 801 F.3d 512, 529 (5th Cir. 2015) (affirming exclusion of defendant insurer’s post-

litigation conduct offered in support of plaintiff’s bad faith claim). Moreover, on this

point, Defendants’ position is Janus-faced: they argue from one side that a denial

letter is “irrelevant,” while complaining from the other that Plaintiffs’ rush to the

courthouse limited their “opportunity to respond to [Plaintiffs’] supplemental flood

loss claim[s].” (Doc. 22 at 2). Finally, and in any event, Defendants’ argument flies in

the face of the SFIP’s express requirement that litigation “must start … after the date

of the written denial,” SFIP, art. VII(R), as well as the Fifth Circuit’s admonishment

that the Court “must … narrowly construe when a policyholder may bring suit.”

Cohen, 924 F.3d at 780.

The Plaintiff insureds take a different tack in their show cause briefing,

arguing that the SFIP is ambiguous regarding when an insured may sue her insurer

for coverage. The Court rejects this argument outright. There is absolutely no

can be said of Defendants’ cases is that they are inapposite: most include an express reference

to the insurer’s written denial; the remainder are silent on the point. In any event, not one of

Defendants’ cases addresses the issue presented here—specifically, whether a written denial

is a predicate to suit under the SFIP.

ambiguity in the SFIP’s requirement that litigation “must start … after the date of

the written denial,” SFIP, art. VII(R) (emphasis added), or, for that matter, the Fifth

Circuit’s admonishment that this provision must be strictly construed, Cohen, 924

F.3d at 780. Cf. Dwyer v. Fid. Nat'l Prop. & Cas. Ins. Co., 565 F.3d 284, 287 (5th Cir.

2009) (distinguishing between the SFIP’s use of the words “must” and “may,” and

finding the former is mandatory whereas the latter is optional).

Moreover, the Court does not share the Plaintiffs’ concerns that requiring a

written denial before a lawsuit produces an “outrageous result” because it would

allow WYO Carriers “to prevent jurisdiction from ever existing by simply never

denying the claim.” (Doc. 23 at 4-5). Indeed, such concerns are belied by the facts in

each of the above-captioned cases, where the Defendant insurers issued payment on

the Plaintiffs’ original Proofs of Loss, and were in the process of reviewing the

Plaintiffs’ “supplemental claims” when Plaintiffs filed suit. (See Doc. 22 at 2). In this

light, Plaintiffs’ “outrage” amounts to handwringing. The same arguments have been

rejected by Courts facing similar jurisdictional impediments to federal flood

insurance actions. See, e.g., Carmouche v. Nat'l Flood Ins. Program, No. 17-cv-11479,

2018 WL 5279121, at *6 (E.D. La. Oct. 24, 2018) (Vance, J.) (“Plaintiff complains that

the outcome the Court reaches today would allow FEMA to ignore an insured's claim

forever, because a claimant will not have recourse in federal court until FEMA

disallows all or part of her claim. But plaintiff’s concern is considerably belied by the

fact that FEMA has not treated her claims idly.”); but see Altman v. Napolitano, No.

10-cv-487, 2013 WL 788452, at *1 (S.D. Tex. Mar. 1, 2013) (Froeschner, M.J.) (“To

accept FEMA's argument would allow FEMA to bar any suit by simply electing to

withhold, forever, any written denial of the claim.”).

In sum, hornbook jurisdictional principles and the plain language of the SFIP

dovetail, and compel the conclusion that the above-captioned actions are not ripe

because Defendants have not denied Plaintiffs’ claims under Plaintiffs’ SFIPs. These

cases will be dismissed for lack of subject matter jurisdiction.

III. CONCLUSION

The Court’s frustration at this turn of events cannot be overstated. The parties’

conduct preceding this Order raises many questions, particularly regarding counsels’

duties of professionalism, candor, and fair-dealing. Why did Plaintiffs (and Plaintiffs’

counsel) rush to file suit a mere days after submitting supplemental Proofs of Loss,

without first obtaining written denials? Why didn’t Defendants (and Defendants’

counsel) immediately raise the issue of the missing denial letters, and instead allow

nearly four years to pass with no challenge whatsoever? Why did counsel avoid

briefing the issue after it was raised in three separate pretrial conferences, and only

submit show cause briefing after the Court conducted its own review of the records in

the remaining flood cases? What penalties, if any, may be imposed based on

Defendants’ ongoing failure to adjust Plaintiffs’ flood-related claims, which are now

five years old?

Such questions remain for another day. For now it is clear, based on the

undisputed facts and the controlling legal principles, that Plaintiffs’ actions are

premature and must be dismissed for lack of subject matter jurisdiction. Shields, 289

F.3d at 837.

Accordingly,

IT IS ORDERED that the above-captioned actions are each DISMISSED for

lack of subject matter jurisdiction.

IT IS FURTHER ORDERED that a copy of this Order shall be filed in each

of the above-captioned actions.

Judgments shall be issued separately.

Baton Rouge, Louisiana, this 22nd day of July, 2021

_______________________________________

JUDGE BRIAN A. JACKSON

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF LOUISIANA